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What happens to your joint mortgage when your partner is placed under debt review?

However, what about situations where you are married out of community of property, are divorced or where you have taken a joint mortgage with a friend or relative? If the other party to the joint mortgage is placed under debt review, what rights do you have?

In theory a debt counsellor is supposed to inform the other bond-holder about the debt review application of their client. This is according to Ms Nthupang Magolego, Senior Legal Advisor at the National Credit Regulator who says, “This notification will give the consumer who has not applied for debt review an opportunity to consider various options that may be available. The consumer who has not applied for debt review will not be flagged at the credit bureaus.”

However, this does not appear to be happening in practice as a reader discovered when her ex-partner put himself under voluntary debt review. “He signed over his power of attorney to a debt counselling company and renegotiated our monthly home loan repayments without him or the debt counsellor telling me. I found out by accident as the home loan repayments come off my ex’s account each month by debit order.”

She asked for the home loan to be removed from the debt review, but neither her ex nor the debt counsellor was willing to do so. The bank also refused to remove the joint home loan from the debt review process and the incident turned into a blame game, with the bank blaming the debt counselling company for applying for debt review on a joint home loan without both parties’ consent and the debt counselling company blaming the bank for not informing them it was a joint home loan when the bank sent through the Certificate of Balance (CoB).

Who is responsible for what?

So, what actually should have happened? Who is responsible for what, and what are the rights of the reader in this regard?

According to Paul Slot, head of the Debt Counsellors Association of South Africa (DCASA), the issue of how to handle joint mortgages under debt review is not clearly defined in the National Credit Act, hence the confusion over the process. “Joint mortgages are not catered for in the National Credit Act and so the issue is very problematic. This topic has been under discussion for the last 10 years at the Credit Industry Forum set up by the NCR.”

According to Slot’s understanding of the law, the onus is on the bank, not the debt counsellor, to inform the client. “The debt counsellor does not need to obtain the consent of the non-debt-review partner as the debt counsellor has no legal relationship with the non-debt-review consumer. It is the client under debt review who is responsible for supplying the financial information and payment commitment from the non-debt-review party. On the other hand, the credit provider (bank) has a legal relationship with both consumers and they should therefore inform both parties of the debt review application, but they don’t always do this.”

Although the joint mortgage can form part of the debt review process without the consent of the partner, if the partner is not over indebted, he/she cannot be included in the debt review process and it should not affect the partner’s credit record.

How the process works

Slot explains how the process currently works:

If a consumer applies for debt review and a joint mortgage is present, the bank will notify the debt counsellor on the Certificate of Balance (COB) that the mortgage is a joint mortgage.

If the bond-holder who is not under debt review is not over-indebted, that person would not form part of the debt review, unless they are married in community of property.

If the bond is paid in full by the non-debt-review party, then the bond can be excluded from the debt review process.

In other situations, the debt counsellor should request the debt review applicant to obtain the non-debt-review consumer’s financial commitment to pay the bond (this may include details of income and expenditure) and that payment should be made directly the bank.

No credit provider or debt counsellor has the statutory power to remove a bond from debt review unless the non-debt-review partner has been paying 100% of the bond.

Considering this legal minefield, if you are going to enter into a joint home loan, make sure you have a separate agreement as to what happens if one of you can no longer pay or are put under debt review.

May I have more clarity on this regard please. The law jargon I find difficult to understand. My partner and I we have joint home loan. He wants to go under debt review but not me. How will this affect me with regards to our joint home loan. What is my options as I do not want to apply for debt review as my finances are pretty stable.

This was quite a contentious point and I wasn’t even clear as there doesn’t seem to be a single way of handling it. They cannot put you under debt review but they can include his portion of the loan under debt review. If you can tell me the name of the bank I will see if they will comment on how they would handle the joint home loan

This is a problem: the Matrimonial Act is applicable and a joint bond with one partner under debt review is not possible without the other partners consent or inclusion in the debt review. This will affect both parties and the credit provider in question has a case against the debt counsellor for breach of his/her registration conditions and the National Credit Act. In the National Credit Act there is a table published which refers to all other applicable legislation: Act 88 of 1984 Matrimonial Property Act section 15
Powers of spouses
(1) Subject to the provisions of subsections (2), (3) and (7), a spouse in a marriage in community of property may perform any juristic act with regard to the joint estate without the consent of the other spouse.

(2) Such a spouse shall not without the written consent of the other spouse –

(a) alienate, mortgage, burden with a servitude or confer any other real right in any immovable property forming part of the joint estate;

(b) enter into any contract for the alienation, mortgaging, burdening with a servitude or conferring of any other real right in immovable property forming part of the joint estate;

(c) alienate, cede or pledge any shares, stock, debentures, debenture bonds, insurance policies, mortgage bonds, fixed deposits or any similar assets, or any investment by or on behalf of the other spouse in a financial institution, forming part of the joint estate;

(d) alienate or pledge any jewellery, coins, stamps, paintings or any other assets forming part of the joint estate and held mainly as investments;

(e) withdraw money held in the name of the other spouse in any account in a banking institution, a building society Of the Post Office Savings Bank of the Republic of South Africa;

(f) enter, as a consumer, into a credit agreement to which the provisions of the National Credit Act, 2005 apply, as ‘consumer’ and ‘credit agreement’ are respectively defined in that Act, but this paragraph does not require the written consent of a spouse before incurring each successive charge under a credit facility, as defined in that Act;

If the parties are not married or married outside of community of property the inclusion of the joint bond under debt review is even more problematic. I would suggest that a expert be contacted in this regard.

The last opinion is that section 86(7)(c) makes provision for one or more credit agreements to be included in debt review NOT ALL OF THEM.

Appreciate your comments – it seems to be a mine field! The rules appear not to be applied correctly and are misunderstood. In this specific case they were not married so the Matrimonial Act does not apply.

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